Insufficient Funds

DEFINITION of 'Insufficient Funds'

Occurs when an account cannot provide adequate funds to satisfy the demand of a payment.

Also referred to as "non-sufficient funds", or "NSF".

BREAKING DOWN 'Insufficient Funds'

Insufficient funds occur when someone tries to purchase an item using a check or debit card without having enough money in his or her bank account. As a result of insufficient funding, the check will bounce or, for debit purchases, the transaction will not be completed and the debit machine will return an error message.

Some banks charge penalties for NSF transactions and, in some circumstances, a number of NSFs on one account can lower the account owner's credit rating.

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